nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2011‒04‒09
fourteen papers chosen by
Matthew Baker
City University of New York

  1. Rarer Actions: Giving and Taking in Third-Party Punishment Games By Simon Halliday
  2. A Dynamic Model of Reciprocity with Asymmetric Equilibrium Payoffs By Niko Noeske
  3. Personality Psychology and Economics By Mathilde Almlund; Angela Lee Duckworth; James J. Heckman; Tim D. Kautz
  4. Emotions, Sanctions and Cooperation By Matteus Joffily; David Masclet; Charles Noussair; Marie-Claire Villeval
  5. War signals: a theory of trade, trust and conflict By Dominic Rohner; Mathias Thoenig; Fabrizio Zilibotti
  6. The emergence of norms from conflicts over just distributions By Luis Miller; Heiko Rauhut; Fabian Winter
  7. Quality and quantity: the role of social interactions in individual health By Damiano, Fiorillo; Fabio, Sabatini
  8. Bosses and Kings: Asymmetric Power in Paired Common Pool and Public Good Games By James C. Cox; Elinor Ostrom; James M. Walker
  9. The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence By David M. McEvoy; Todd L. Cherry; John K. Stranlund
  10. Parents, Television and Cultural Change By Esther Hauk; Giovanni Immordino
  11. Understanding Social Interactions: Evidence from the Classroom By Giacomo De Giorgi; Michele Pellizzari
  12. Identity and Social Distance in Friendship Formation By de Marti, Joan; Zenou, Yves
  13. Is Utility Transferable? A Revealed Preference Analysis By Cherchye, L.J.H.; Demuynck, T.; Rock, B. de
  14. Male Pragmatism in Ethical Decision Making By Kray, Laura J.; Haselhuhn, Michael P.

  1. By: Simon Halliday
    Abstract: In attempting to understand cooperation, economists have used the methods of experimental economics to focus on spheres of human behavior in which humans display altruism, reciprocity, or other social preferences through giving and through punishment. Recent work has begun to examine whether allowing allocations in the negative domain, that is, allowing subjects to take (or steal) other subjects' endowments, might affect participants' behavior. If participants' behavior is affected, then our understanding of experimental results generally, and social preferences speci cally, should be affected too (List 2007, Bardsley 2008). In this paper we propose an experimental variation on the Dictator Game with third-party punishment (Fehr and Fischbacher 2004b). We examine, first, a basic Dictator Game with third-party punishment, after which we introduce a treatment allowing the dictator to take from the receiver, in the knowledge that the third party could punish them. The results conflict. Many dictators choose the most self-interested option, while, when taking is introduced as an option for the dictator, third parties punish the most self-interested option more than in the baseline.
    JEL: C91 D63
    Date: 2011
  2. By: Niko Noeske (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We analyze indirect evolutionary two-player games to identify the dynamic emergence of (strong) reciprocity in a large number of economic settings. The underlying evolutionary environment allows for an arbitrary initial population state provided that every degree of the compact space of reciprocity is adherent to at least one individual of the corresponding continuum population. The basic results, which essentially maintain the evolutionary viability of reciprocity, are, in several directions, context dependent, and minimum valid for the wide class of evolutionary dynamics which hold for regularity and payoff-monotonicity. The evolutionary solution concept which is applied to elevate the explanatory power of emerging Nash equilibria is dominance solvability, in this case, for continuous strategy spaces. An asymmetric aspect comes into play since the actions of the evolutionary players are not only determined by the current state of reciprocity but also by their inherent, context-free preferences towards others which differ among one another devoid of being endogenized in the time span of the dynamic process at hand.
    Keywords: reciprocity, evolutionary game theory, dominance solvability, asymmetric game setting, payoff-monotonic dynamics
    Date: 2011–03
  3. By: Mathilde Almlund; Angela Lee Duckworth; James J. Heckman; Tim D. Kautz
    Abstract: This paper explores the power of personality traits both as predictors and as causes of academic and economic success, health, and criminal activity. Measured personality is interpreted as a construct derived from an economic model of preferences, constraints, and information. Evidence is reviewed about the “situational specificity” of personality traits and preferences. An extreme version of the situationist view claims that there are no stable personality traits or preference parameters that persons carry across different situations. Those who hold this view claim that personality psychology has little relevance for economics. The biological and evolutionary origins of personality traits are explored. Personality measurement systems and relationships among the measures used by psychologists are examined. The predictive power of personality measures is compared with the predictive power of measures of cognition captured by IQ and achievement tests. For many outcomes, personality measures are just as predictive as cognitive measures, even after controlling for family background and cognition. Moreover, standard measures of cognition are heavily influenced by personality traits and incentives. Measured personality traits are positively correlated over the life cycle. However, they are not fixed and can be altered by experience and investment. Intervention studies, along with studies in biology and neuroscience, establish a causal basis for the observed effect of personality traits on economic and social outcomes. Personality traits are more malleable over the life cycle compared to cognition, which becomes highly rank stable around age 10. Interventions that change personality are promising avenues for addressing poverty and disadvantage.
    JEL: I2 J24
    Date: 2011–02
  4. By: Matteus Joffily (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); David Masclet (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen); Charles Noussair (Department of economics, Tilburg University - Tilburg University); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)
    Abstract: We use skin conductance responses and self-reports of hedonic valence to study the emotional basis of cooperation and punishment in a social dilemma. Emotional reaction to free-riding incites individuals to apply sanctions when they are available. The application of sanctions activates a "virtuous emotional circle" that accompanies cooperation. Emotionally aroused cooperators relieve negative emotions when they punish free riders. In response, the free-riders experience negative emotions when punished, and increase their subsequent level of cooperation. The outcome is an increased level of contribution that becomes the new standard or norm. For a given contribution level, individuals attain higher levels of satisfaction when sanctioning institutions are in place.
    Keywords: Emotions; Sanctions; Cooperation; Experiment; Skin Conductance Responses
    Date: 2011
  5. By: Dominic Rohner; Mathias Thoenig; Fabrizio Zilibotti
    Abstract: We construct a dynamic theory of civil conflict hinging on inter-ethnic trust and trade. The model economy is inhabitated by two ethnic groups. Inter-ethnic trade requires imperfectly observed bilateral investments and one group has to form beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals that the aggressor has a low propensity to trade. Agents observe the history of conflicts and update their beliefs over time, transmitting them to the next generation. The theory bears a set of testable predictions. First, war is a stochastic process whose frequency depends on the state of endogenous beliefs. Second, the probability of future conflicts increases after each conflict episode. Third, "accidental" conflicts that do not reflect economic fundamentals can lead to a permanent breakdown of trust, plunging a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies such as peacekeeping forces or externally imposed regime changes have instead no persistent effects.
    Keywords: Beliefs, civil war, conict, cultural transmission, ethnic fractionalization, human capital investments, learning, matching, peacekeeping, stochastic war, strategic complementarity, trade
    JEL: D74 D83 O15 Q34
    Date: 2011–03
  6. By: Luis Miller (CESS, Nuffield College, Oxford, Great Britain); Heiko Rauhut (ETH Zurich, Swiss Federal Institute of Technology); Fabian Winter (Max Planck Institute of Economics, Jena, Germany)
    Abstract: Why is it that well-intentioned actions can create persistent conflicts? While norms are widely regarded as a source for cooperation, this article proposes a novel theory in which the emergence of norms can be understood as a bargaining process in which normative conflicts explain the finally emerging norm. The theory is tested with a dynamical experiment on conflicts over the consideration of equality, effort or efficiency for the distribution of joint earnings. Normative conflict is measured by the number of rejected offers in a recursive bargaining game. The emerging normative system is analyzed by feedback cycles between micro- and macro-level. It is demonstrated that more normative cues cause more normative conflict. Further, under the structural conditions of either simple or complex situations, the convergence towards a simple and widely shared norm is likely. In contrast, in moderately complex situations, convergence is unlikely and several equally reasonable norms co-exist. The findings are discussed with respect to the integration of sociological conflict theory with the bargaining concept in economic theory.
    Keywords: social norms, normative conflict, bargaining, cooperation, experiment
    JEL: C91 D63
    Date: 2011–04–04
  7. By: Damiano, Fiorillo; Fabio, Sabatini
    Abstract: The public health literature focusing on the detrimental effects of social isolation has shown that the quantity of social connections is positively correlated with individual health. Drawing on pooled cross-sectional data, we test this hypothesis on a representative sample of the Italian population. Our findings show that, besides the quantity of interactions, it is their quality – as measured by subjective satisfaction derived from relationships with friends – that works as the best predictor of health. We point out the existence of health disparities based on socio-economic status. Poorer and less educated individuals are exposed to a higher probability of reporting poor health conditions. The risk is even worse for unemployed and retired workers. This paper contributes to the literature in two substantive dimensions. This is the first empirical study of the relationship between social interactions and health in Italy. Second, we add to previous studies by carrying out the first assessment of the role of satisfaction in interpersonal relations.
    Keywords: Health; well-being; satisfaction; social interactions; social capital; family; Italy.
    JEL: Z12 I12 I18 Z13
    Date: 2011–03–22
  8. By: James C. Cox; Elinor Ostrom; James M. Walker
    Abstract: Social dilemmas characterize decision environments in which individuals' exclusive pursuit of their own material self-interest can produce inefficient allocations. Two such environments are those characterized by public goods and common-pool resources in which the social dilemmas can be manifested in free riding and tragedy of the commons outcomes. Much field and laboratory research has focused on the effectiveness of alternative political-economic institutions in counteracting individuals' tendencies to underprovide public goods and over-extract commonpool resources. Previous laboratory research has not focused on the implications of power asymmetries in paired public good and common pool game settings. In our baseline treatments, we experiment with simultaneous move one-period games in which paired comparisons can be made across settings with public good and common pool games. In our central treatments, we experiment with pairs of sequential move one-period games in which second movers with asymmetric power -- "bosses and kings" -- can have large effects on efficiency and equity. The central questions are whether the bosses and kings do have significant effects on outcomes and whether those effects differ across the paired public good and common pool games in ways that can be rationalized by some theories but not others.
    Date: 2011–03
  9. By: David M. McEvoy (Department of Economics, Appalachian State University); Todd L. Cherry (Department of Economics, Appalachian State University); John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: This paper examines the endogenous formation of coalitions that provide public goods in which players implement a minimum participation requirement before deciding whether to join. We demonstrate theoretically that payoff-maximizing players will vote to implement efficient participation requirements and these coalitions will form. However, we also demonstrate that if some players are averse to inequality they can cause inefficient outcomes. Inequality-averse players can limit free riding by implementing larger than efficient coalitions or by blocking efficient coalitions from forming. We test the theory with experimental methods and observe individual behavior and coalition formation consistent with a model of inequality-averse players.
    Keywords: public goods, coalition formation, inequality aversion, participation requirement, experiments
    JEL: C92 H41
    Date: 2011–04
  10. By: Esther Hauk; Giovanni Immordino
    Abstract: This paper develops a model of cultural transmission where television plays a central role for socialization. Parents split their free time between educating their children which is costly and watching TV which though entertaining might socialize the children to the wrong trait. The free to air television industry maximizes advertisement revenue. We show that TV watching is increasing in cultural coverage, cost of education, TV's entertainment value and decreasing in the perceived cultural distance between the two traits. A monopolistic television industry captures all TV watching by both groups if the perceived cultural distance between groups is small relative to the TV's entertainment value. Otherwise, more coverage will be given to the most profitable group where profitability increases in group size, advertisement sensitivity and perceived cultural distance. This leads to two possible steady states where one group is larger but both groups survive in the long run. Competition in the media industry might lead to cultural extinction but only if one group is very insensitive to advertisement and not radical enough not to watch TV. We briefly discuss the existing evidence for the empirical predictions of the model.
    Keywords: television, socialization, cultural trait dynamics, media coverage.
    JEL: Z1 L82
    Date: 2011–03–30
  11. By: Giacomo De Giorgi; Michele Pellizzari
    Abstract: There is a large literature on social interactions and still little is known about the economic mechanisms leading to the high level of clustering in behavior that is so commonly observed in the data. In this paper we present a model in which agents are allowed to interact according to three distinct mechanisms, and we derive testable implications on the mean and the variance of the outcomes within and across groups. The empirical tests allow us to distinguish which mechanism(s) generates the observed patterns in the data. In our application we study the performance of undergraduate students and we find that social interactions take the form of mutual insurance. Such a result bears crucial policy implications for all those situations in which social interactions are important, from teamwork to class formation in education and co-authorship in academic research.
    Date: 2011
  12. By: de Marti, Joan (Universitat Pompeu Fabra and Barcelona GSE); Zenou, Yves (Dept. of Economics, Stockholm University)
    Abstract: We analyze a network formation model where agents belong to different communities. Both individual benefits and costs depend on direct as well as indirect connections. Benefits of an indirect connection decrease with distance in the network while the cost of a link depends on the type of agents involved. Two individuals from the same community always face a low linking cost and the cost of forming a relationship for two individuals of different communities diminishes with the rate of exposure of each of them to the other community. We derive a number of results with regard to equilibrium networks. In particular, socialization among the same type of agents can be weak even if the within-type link cost is very low and oppositional identity patterns can arise for a wide range of parameters. Our model also suggests that policies aiming at reducing segregation are socially desirable only if they reduce the within-community cost differential by a sufficiently large amount.
    Keywords: networks; identity; homophily; social norms
    JEL: D85 J15
    Date: 2011–04–01
  13. By: Cherchye, L.J.H.; Demuynck, T.; Rock, B. de (Tilburg University, Center for Economic Research)
    Abstract: We provide a revealed preference analysis of the transferable utility hypothesis, which is widely used in economic models. First, we establish revealed preference conditions that must be satisfied for observed group behavior to be consistent with Pareto efficiency under transferable utility. Next, we show that these conditions are easily testable by means of integer programming methods. The tests are entirely nonparametric, which makes them robust with respect to specification errors. Finally, we demonstrate the practical usefulness of our conditions by means of an application to Spanish consumption data. To the best of our knowledge, this is the first empirical test of the transferable utility hypothesis.
    Keywords: transferable utility hypothesis;generalized quasi-linearity;nonparamet- ric tests;revealed preferences.
    JEL: C14 D11 D12 D13
    Date: 2011
  14. By: Kray, Laura J.; Haselhuhn, Michael P.
    Abstract: Why do men have more lenient ethical standards than women? To address this question, we test the male pragmatism hypothesis, which posits that men rely on their social and achievement motivations to set ethical standards more so than women. Across two studies, motivation was both manipulated and measured before examining ethicality judgments. Study 1 manipulated identification with two parties in an ethical dilemma and found that men were more egocentric than women. Whereas men’s ethicality judgments were affected by the identification manipulation, women’s judgments were not. Study 2 examined whether implicit negotiation beliefs, which predict achievement motivations to either demonstrate or develop negotiating skill, predicted ethicality judgments and, if so, whether this relationship was moderated by gender. As hypothesized, fixed beliefs predicted lower ethical standards, particularly for men. In combination, these findings suggest men are more pragmatic in setting ethical standards than women.
    Keywords: Gender, ethical judgment, egocentrism, self-interest, negotiation, motivated reasoning, Organizational Behavior and Theory
    Date: 2011–03–30

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